Gold Fields agreement justified

Deputy Minister of Finance Cassiel Ato Forson has justified government’s decision of  sign a development agreement with mining giant Gold Fields, affirming that there is no way government could have declined the agreement.

“As soon as you set one precedent in the case of Ghana, like Newmont, others doing like-investments will ask for similar equality. 

“Failure to do it will mean they are going away, and that is why I said in taxing petroleum or mineral resources in the extraction industry you really will have to look at what your sub-region is doing,” Forson said.

He highlighted that others are benchmarking, and failure to do so would mean things won’t be as they were; which means taking an investment or financial decision.

Forson explained government is taking a decision that benefits the community as a whole, not necessarily only looking at revenue but both.

“So you don’t only look at how much you get in terms of how much you are going to benefit, the impact on job-creation, the impact on growth, add them and then form an opinion. So if you are to dwell on one side you make a mistake,” he added.

The committee that is reviewing the stability agreements disclosed the one given to Goldfields could result in the country losing about US$26million annually.

On 29th March 2016, Gold Fields announced in Johannesburg that it had concluded “development agreements” with the government of Ghana, reducing corporate tax in respect of its Tarkwa and Damang Mines from a rate of 35.0 percent to 32.5 percent, effective 17 March 2016.

 

Regarding royalty payments, the agreement mentioned that up to a gold price of US$1,300 per ounce, Gold Fields will pay a royalty rate of three percent. On a sliding scale, that rate will only rise back to five percent when the price reaches US$2,300/oz or above with effect from 1st January 2017.  

The agreement will last a period of 11 years for Tarkwa Mine, while it will be nine years for Damang Mine. Each term is also renewable for another five years. 

The agreement, according to Gold Fields officials, is expected to save 2,000 jobs at the Damang Mine which could be lost if the mine was placed under care and maintenance. The company has again planned to invest about US$33million annually for its operations in the country. 

B&FT has gathered that Gold Fields earned the right to negotiate a development agreement because it is the leading mining investor in the country, and is planning to increase its investment drive in the country. Again, the Damang Mine is in distress and something has to be done to save it.

Gold Fields Ghana (GFG) is presently the number-one gold mining company and largest gold producer in Ghana, with annual production in excess of 935,000 ounces from its two operating mines at Damang and Tarkwa. 

The company engages about 5,612 Ghanaians in direct employment and is owned by Gold Fields Limited (GFL), a global multinational precious metals producer headquartered in Johannesburg, South Africa.